The Impact of Research and Development for Business Innovations in Lithuania

Streimikiene, Dalia Article The Impact of Research and Development for Business Innovations in Lithuania Amfiteatru Economic Journal Provided in Cooperation with: The Bucharest University of Economic Studies Suggested Citation: Streimikiene, Dalia (2014) : The Impact of Research and Development for Business Innovations in Lithuania, Amfiteatru Economic Journal, ISSN 2247-9104, The Bucharest University of Economic Studies, Bucharest, Vol. 16, Iss. 37, pp. 965-979 This Version is available at: https://hdl.handle.net/10419/168869 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ Economic Interferences AE Vol. XVI • No. 37 • August 2014 965 THE IMPACT OF RESEARCH AND DEVELOPMENT FOR BUSINESS INNOVATIONS IN LITHUANIA Dalia Streimikiene* Vilnius University, Kaunas Faculty of Humanities, Kaunas, Lithuania Abstract The paper aims to assess the impact of research and development on innovativeness of the country as research and development is one of the main drivers of economic development and creation of modern knowledge based economy stipulating efficient use of natural resources and reducing negative impact on environment. The paper analyzes the main Lithuanian policy documents aiming at promotion of knowledge economy, innovations and research and development and financing of research, technological development and innovation. The programmes aiming at modernization of enterprises and trends of sustainable industrial development in Lithuania are critically reviewed. The Summary Innovation Index (SII) of Lithuania was applied to assess the impact of implementing policies promoting research and development in Lithuania. The analysis indicated that one of the main factors determining the relatively low Lithuanian SII is the insufficient level of investment in research and development (R&D). While R&D expenditure in the general government and higher education sectors corresponds to the EU average, it remains low in the business sector. Keywords: research and development, sustainable industrial development, modernization of enterprises, innovation index JEL Classification: L2, L26; L53; O32; O35 Introduction Research and development is one of the main drivers of economic development and creation of modern knowledge based economy stipulating efficient use of natural resources and reducing negative impact on environment.The results of R&D and innovative activity in Lithuania have to achieve the general targets declared at the European level and ensure Lithuania a strong competitive position in global markets. Over the next decade, Lithuania has to create an economy based on innovations, new technologies and qualified human resources and create better general and financing conditions for scientific research and innovation so that innovative ideas are translated into goods and services aimed at promoting growth and new job creation The National Programme for the Development of * Author's contact: e-mail: [email protected] AE The Impact of Research and Development for Business Innovations in Lithuania Amfiteatru Economic 966 Studies, Scientific Research and Experimental (Social and Cultural) Development for 2013–2020 (Republic of Lithuania, 2012a) and The 2013–2015 Action Plan for the National Programme for the Development of Studies, Research and Experimental (Social and Cultural) Development For 2013–2020 (Government of Republic of Lithuania (2012b) were developed with a view to defining the main directions of studies, scientific research and experimental (social and cultural) development (hereinafter – SR&ED), which would encourage sustainable development of people and society, improve the country’s competitiveness, and comply with the key provisions of the Lithuanian Progress Strategy ‘Lithuania 2030’(Government of Republic of Lithuania, 2010a) and the Commission Communication “Europe 2020: A strategy for smart, sustainable and inclusive growth” (EC, .2010). The Programme will provide grounds for training highly qualified specialists who are able to compete on the labour market, creating conditions for high-quality SR&ED practices to form, and developing interinstitutional, intersectoral and international cooperation. The strategic objective of the Programme is to encourage the sustainable development of people and society, which improves the country’s competitiveness and creates conditions for innovation by developing studies and implementing SR&ED(Republic of Lithuania, 2012a). To foster competitiveness, Lithuania will follow these priority action directionsidentified in Lithuanian innovation strategy for the year 2010-2020 (Government of Republic of Lithuania, 2011b):  Develop national sectors of high and medium high-technologies by attracting public and private sector investments to R&D and promoting science and business partnerships;  Develop clustered innovative traditional industries;  Develop new fields of economic activity: clean technologies, future energy, creative and cultural industries, areas of health and welfare;  Improve business and investment conditions in Lithuania;  Promote foreign investment by developing service hubs for export in Lithuania;  Improve the quality of the education system with special attention to lifelong learning;  Train highly qualified specialists meeting public and economic demands;  Develop and use R&D results in order to highlight and strengthen the country’s advantages;  Ensure quality functioning of the study and R&D system;  Strengthen foreign language teaching. The aim of the paper is to review Lithuanian research and innovation policies seeking to develop and implement resource efficient technologies, environmentally safe production. The main tasks to achieve this aim are:  to analyze the main Lithuanian policy documents aiming at promotion of knowledge economy, innovations and research and development;  to analyze financing of research, technological development and innovation; Economic Interferences AE Vol. XVI • No. 37 • August 2014 967  to analyseprogrammes aiming at modernization of enterprises in relation with trends of sustainable industrial development in Lithuania;  todefine the main results of implementing policies promoting research and innovations in Lithuania. 1. Lithuanian innovation strategy After the new 15th Lithuanian Government took office in late 2008, the priority of creating the innovating and knowledge-based economy was put high on the political agenda. The new much stronger political will was demonstrated, firstly, by adopting the national innovation strategy in 2010 and, secondly, by establishing the national Agency for Science, Innovation and Technology (MITA) the same year. A number of other innovation policy related measures and initiatives were introduced during the period of 2009-2011. The Lithuanian Innovation Strategy (LIS) for the period 2010-2020 aims to drive innovation in various areas, acknowledging that this is needed to modernize the economy (Government of Republic of Lithuania, 2011b). The strategy emphasises that the Lithuanian government should foster innovation by any means. The longer term objective is to improve the Lithuanian innovation index to the European average level by 2020. To this end, the Lithuanian government intends to strengthen cooperative research projects that can support the long-term objectives. The LIS Action Plan 2010-2013, containing a list of specific measures related to research and innovation and developed as a result of efforts by the 12 ministries, was approved in October 2010. This document demonstrates a shift in the overall innovation policy approach as compared to the previous fragmented pool of strategic documents and priorities (Government of Republic of Lithuania, 2010c):  LIS demonstrates a shift towards the ‘horizontal’ (‘broad-based’) innovation policy. The objectives of the Strategy call for greater emphasis on the knowledge triangle policies as a common effort of several ministries. The Action Plan for 2010-2013 integrates the innovation policy related measures of all ministries operating in Lithuania.  The document extends the definition of ‘innovation’, by including new objectives to foster social innovation, customer-oriented innovation, non-technological innovation, demand-oriented innovation, and public innovation. Unfortunately, the appetite of the new Government for strengthening the innovation policy mix is constrained by the State budget crisis due to the recession. The Strategy ‘inherited’ the previously planned RTDI policy mix. Therefore, the Action Plan for 2010-2013 does not foresee any specific measures that would contribute to fostering the social, customer-oriented or public innovation;  There is much stronger emphasis on the internationalization of the innovation policy mix and innovation networks. The Strategy supports integration of the business actors and Public Research Organizations (PROs) into the international innovation networks; it puts higher emphasis on direct foreign investments, internationalization of business, etc.;  There is also greater emphasis on creativity and entrepreneurship, especially on the establishment and growth of the young innovative companies, start-ups, and ‘gazelles’. The overall aim of the Strategy is to foster the creative society. The innovation policy mix has not changed much since 2009 for two reasons. Firstly, current innovation policy mix is implemented largely through the 2007-2013 EU Structural AE The Impact of Research and Development for Business Innovations in Lithuania Amfiteatru Economic 968 Funds, which were planned in 2006-2007. Secondly, the government’s ability to strengthen the budget for innovation and introduce new measures remains heavily constrained by the State budget cuts. Therefore, despite the newly adopted Lithuanian Innovation Strategy which introduced new approach to innovation support, no major changes occurred in the innovation policy mix. The few exceptions are discussed below (Paliokaitė, 2012). The national budget funded pilot measure of ‘innovation vouchers’ (each worth €2,900–€5,800, annual budget €0.3m) was introduced by the MoE and MITA in summer 2010. The funds were distributed in less than a month, therefore the innovation vouchers were re-launched in summer 2011. The measure is targeted at the small and medium-sized enterprises (SMEs). The Lithuanian Innovation Strategy defines a list of so-called ‘breakthrough’ sectors and technologies, namely: biotechnologies, laser technologies, ICT, electric and optical technologies, ‘clean’ technologies, future energy, creative industries, health and wellbeing, chemicals sector, transport and logistics, wood and furniture, textiles, and food industry. In general, with small amendments, this list remains unchanged since 2002. In January 2011 the Minister of Education and Science and the Minister of Economy approved the High Technology Development Programme for 2011-2013 that will invest into high technologies development in five priority sectors: biotechnology, mechatronics, laser technology, ICT, and nanotechnology and electronics (budget for 2011 is €0.29m). In March 2011 the Minister of Education and Science and the Minister of Economy approved the new Industrial Biotechnologies Development Programme for 2011-2013, which is expected to accelerate development of the Lithuanian biotechnology industry (budget for 2011 is €0.29m). Both programmes are administered by MITA (Republic of Lithuania, 2012c). National Programme for the Development of Studies, Research and Experimental Development for 2013–2020 is aimed at strengthening the country’s competitiveness and increasing welfare by developing the study, R&D and innovation systems. Planned measures include (Republic of Lithuania, 2012a):  Continuous update and improvement of the study content and process;  Modernization of the necessary study infrastructure for the organization of the quality study process;  Ensuring the implementation of R&D activities conforming to the highest international level, meeting public and economic demands and creating a high value added, strengthening of intellectual R&D potential;  Development, update and concentration of infrastructure which would enable high impact technologies and other promising R&D directions and economic sectors to be developed;  Creation and development of the innovative use of R&D results;  Ensuring the monitoring of activities, quality assessment and communication between research and study institutions. Economic Interferences AE Vol. XVI • No. 37 • August 2014 969 Planned measures include Republic of Lithuania, 2012b):  Implementation of measures provided for in the General Education Curriculum Formation, Assessment, Updating and Implementation Strategy (2006–2012) pertaining to the teaching and widened choice of foreign languages and increasing student choice in studying foreign languages;  Implementation of projects of the School Improvement Programme Plus (SIP+) and other projects aimed at improvements in school infrastructure, developing management competences and leadership skills, increasing student choice in foreign language learning, improving early teaching of foreign languages and ensuring project continuity. A new version of the Law of the Republic of Lithuania on Higher Education and Research passed by the Seimas of the Republic of Lithuania in 2009 lays down foundations for a systematic reform of science and studies. As of 2009, studies in higher education establishments have been funded from the so called student‘s basket. The number of entrants to higher education is in line with the financial possibilities of the state. Actual studies are funded from public and private funds. 2. Integrated science, studies and business centers To make science more competitive, the focus is placed on project-based competitive funding for research. The development of science and technologies, cooperation between universities and businesses, scientific cooperation and public-private partnership are still of great relevance, therefore much attention is given to the advancement of the integrated centers (valleys) for science, studies and business. Programmes for five Valleys have been approved by resolutions of the Government of Lithuania in 2008. It has been decided to prepare Joint Research Programmes (hereinafter referred to as JRP) aiming at co-ordination of the implementation of the projects of Valleys and better utilization of the funding allocated. Integrated Science, Studies and Business Centers (hereinafter referred to as Valleys) are developed in Lithuania with a view to building up research, studies and knowledge economy clusters of international level in Lithuania, accelerating the development of knowledge society and consolidating the long-term foundation for the competitiveness of Lithuania’s economy. The Valleys’ development programmes are designed including their objectives, tasks and establishment conditions as specified under this Concept and approved by the Government of the Republic of Lithuania. The main objectives of development of Valleys are the following (Paliokaite, 2012):  Concentrate, upgrade and optimize the infrastructure that would facilitate the development of high technologies and other most viable sectors of science, technology and business as specified in High Technology Development Programme for 2007–2013, the Foresight for the Lithuanian Economy in the Light of Regional and Global Tendencies, the Strategic Research Plans (Agendas) of the National Technology Platforms and other strategic planning documents of national economic development;  Consolidate the links with research and studies, and training of researchers and other experts;  Provide favorable environment for the transfer of scientific know how and technology to the business sector; AE The Impact of Research and Development for Business Innovations in Lithuania Amfiteatru Economic 970  Establish centers for promoting research, studies and knowledge intensive business synergies, capable of competing on the international arena, developing scientific cooperation of the highest level, and attracting foreign investment that requires high intellectual potential;  Establish knowledge economy clusters on the basis of science, studies, and knowledge intensive business. The Programmes of Valleys were adopted in Lithuania (Table no. 1). The 5 Integrated science, studies and business centres(valleys) were established: „Saulėtekis“;„Santara“ , Santaka“, „Nemunas“ and Lithuanian maritime sector development. Table no. 1: Integrated Science, Studies and Business Valleys The name Aims of valley creation Funds MTEP directions Initiators “Saulėtekis” to create an integrated centre/valley of science, studies and business for the development of the sectors of physical, technological and civil engineering through the development of business, internationally competitive fundamental and applied research, as well as the preparation of human resources to work in the mentioned R&D areas. 93,4 m. € Laser and Light Technologies; Materials Science and Nanotechnologies; Semiconductor Physics and Electronics; Civil Engineering Vilnius University; Vilnius Gediminas Technical University; Center for Physical Sciences and Technology; Public entity „Sunrise Valley“ „Santara“ to establish the valley aimed at the development of the sectors of biotechnology, molecular medicine and biopharmacy, innovative medical technologies, ecosystems and sustainable development, informatics and communication technologies in Lithuania, to enable starting up of business and development of fundamental and applied science competitive on the international market, also to train highly qualified specialists in the mentioned R&D areas. 95,914 m. €. Biotechnology; Innovative Medical Technologies, Molecular Medicine and Biopharmacy; Ecosystems and Sustainable Development; Informatics and Communication Technologies. Vilnius University; Vilnius Gediminas Technical University; Innovative Medicine Centre; Nature Research Centre; Vilnius University Hospital Santariškių Clinics; Visoriai Information Technology Park “Santaka” to establish the valley where public and private research will be performed, knowledge-intensive businesses will be launched and knowledge-intensive services will be provided. Sustainable Chemistry (including Biopharmacy); Mechatronics and Related Electronic Technologies; Future Energy and (including Environmental Kaunas University of Technology, Lithuanian University of Health Sciences, Lithuanian Energy Institute Economic Interferences AE Vol. XVI • No. 37 • August 2014 971 The name Aims of valley creation Funds MTEP directions Initiators Engineering); Information and Telecommunication Technologies ‘Nemunas” Developing available facilities, to create a specialized branch integrated science, studies and business centre (valley) NEMUNAS that has its infrastructure for public and private research and studies in the agricultural, forestry and food industry sectors as well as conditions for the establishment of knowledge-intensive businesses. 55,14 m. € Agrobiotechnology, Bioenergy and Forestry;Food technology, safety and health Lithuanian University of Agriculture Lithuanian University of Health Sciences Lithuanian Agrarian and Forest Sciences Centre Kaunas University of Technology Marine valley to create the centre (Valley) for the development of Lithuania’s maritime sector, aimed at promotion of fundamental and applied studies competitive on the global market and at training highly qualified specialists for the needs of Lithuania’s maritime sector 59,954 m. € Marine environment; Marine technologies Klaipėda University, Nature Research Centre Source:Government of Republic of Lithuania, 2012. The governing body of the valley’s development process is the Valleys’ Supervisory Council (Council); formed by the order of the Minister of Education and Science and Minister of Economy (the two ministries coordinate development of valleys). Its main function is to consider and submit proposals to the Ministry of Education and Science, the Ministry of Economy and the Government on strategic decisions regarding for development of the valleys and Joint Research Programmes.Valleys’ monitoring group is composed from Lithuanian and foreign experts. Its main function is to monitor implementation and development of Valleys projects and Joint Research Programmes. They provide information, data, consultations and recommendations to the Valleys Supervision Board and the Management Committees of the respective EU SF programmes, necessary to take decisions concerning development, financing and implementation of the Valleys‘ projects and the JRPs. Monitoring groups provide recommendations and consultations for the institutions, responsible for R&D infrastructure development projects and create an efficiently operated “virtual enterprise” offering the best opportunities for foreign investments and public-private partnership in R&D and innovations. These institutions also introduce stage-gated funding control and relate the requested funding to a set of key performance indicators and perform regular evaluation of valleys’ projects development issues. AE The Impact of Research and Development for Business Innovations in Lithuania Amfiteatru Economic 972 3. Financing the research, technological development and innovation The reorganization of research institutes has practically been completed: 16 research institutes have merged with universities, 13 research institutes merged in five research centers (research institutes), six institutes have been granted the status of a research institute.The science (art) funding arrangements have been amended, whereby one part of public funding shall be linked to the payroll and long-term institutional programmes, and the other part shall be linked to scientific (artistic) performance outcomes, thereby increasing public accountability of research institutes, as their long-term programmes (which are their main activity) will be approved by the Minister of Education and Science. The new scheme is expected to better meet specific academic requirements. State funds for research will fall in seven fields: humanities (13%), social research (12%), physical research (25%), biomedical research (19%), agriculture research (6%) and technological research (21%), as well as arts (4%). The proportion of funds has been set in accordance with the number of scientists working in a specific field and the level of research. Applied research will get a larger share of funds than before. A new financial instrument has been introduced: part of the funds will be allocated through the Lithuanian Science Council to support research commissioned by economic entities (BTI, 2012). The current research, technological development and innovation RTDI policy in Lithuania is mainly funded by the European Regional Development Fund (ERDF)/ European Social Fund (ESF); only an insignificant part (about 2%-5%) is funded from the State budget. The public-private partnerships do not play a role in leveraging additional and/or complementary funding. The largest share of RTDI funding in Lithuania (more than €600m, or about 45% of total policy budget available for 2008-2013) is currently devoted to promoting and sustaining the growth of innovative enterprises. Venture capital funds comprise the highest share (about €415m) of funds in this category. The financial engineering funds as well as support to organizational innovations received highest political attention during the financial and economic crisis.Another 43% of the total public RTDI funding is to be allocated to research and technologies. More than half of it will be allocated to strengthening the public R&D infrastructure in the five integrated science, business and studies ‘valleys’. The take up of these funds has been relatively low so far – less than 2% of the science ‘valleys’ funds were allocated in 2010. The remaining 12% of the RTDI funding are planned for the investments in human resources (€157m for 2007-2013 periods; about €12.1m of which allocated in 2010). In order to ensure the long-term accumulation of human resources for R&D, for the programming period of 2007-2013, a national ‘Researchers Careers’ programme’ (RCP) schedules a variety of actions. For example, such actions like the attraction of the highlyskilled researchers, funding short-term visits of the researchers from abroad, the researcher mobility between science and industry, etc. Clearly, governance and horizontal RTDI policies, as well as markets and innovation culture, are currently beyond the RTDI policy attention in Lithuania. On the other hand, there are certain non-financial measures in these categories. For example, in December 2009, the Minister of Education and Science approved a set of IP Management Recommendations (guidelines) for the HEIs and Pros’ In these Recommendations, the organizations are advised to organize IP management strategies in a way that creates more incentives for knowledge commercialization (BTI, 2012). 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